Strong December Jobs & Retail Tosses Imminent Recession Calls
Data: US hiring was strong and firing was very few in December
New estimates just released from ADP suggest that the number of new jobs created last month may have been double what was expected. Plus, the four week moving average of initial jobless claims fell to to its lowest level in three and a half years during the month.
From Econoday.com
Released on 1/5/2012 8:15:00 AM For Dec, 2011PriorConsensusConsensus RangeActualADP employment206,000 160,000 145,000 to 220,000 325,000
Highlights
ADP is calling for a surge in private payroll growth, to 325,000 for December to double expectations for 160,000 and vs a revised 204,000 in November.
So, combined with retail sales that were pretty healthy most all month long, does the Economic Cycle Research Institute's bold and unwavering forecast from four months ago end up being their first incorrect recession call in its history?
The short answer is still, probably, no, but it is now clear that the odds of imminent new recession in the United States has been going down, and for reasons largely in conflict with ECRI's theology.
ECRI may have boxed itself in.
Unlike most forecasters who put out a percent chance of new recession (much like how we do here in the_recession during our polls), and more like weather forecasters, ECRI's calls are usually very black and white, no gray. They tend to either unequivocally say that a recession is imminent, or that recession is going to be averted. No percents needed, thank you very much.
According to Lakshman Achuthan, ECRI's managing director, they believe that the business cycle trumps all, and as such, this was their public statement released at the end of September:
ECRIToday the ECRI publicly announced that the U.S. is tipping into a recession.
Early last week, ECRI notified clients that the U.S. economy is indeed tipping into a new recession. And there’s nothing that policy makers can do to head it off.
ECRI’s recession call isn’t based on just one or two leading indexes, but on dozens of specialized leading indexes, including the U.S. Long Leading Index, which was the first to turn down - before the Arab Spring and Japanese earthquake - to be followed by downturns in the Weekly Leading Index and other shorter-leading indexes. In fact, the most reliable forward-looking indicators are now collectively behaving as they did on the cusp of full-blown recessions, not “soft landings.”
Not exactly any wiggle room in there. However, a few weeks ago when confronted with the reality of an economy seemingly improving while on Bloomberg, Lakshman did - adjust their description to clarify that what they really meant was that the US would be entering technical recession by the middle of 2012. Not exactly what I suspect most thought he meant at the end of September, 2011, but okay.
What happened between September & now to make the economy so much better?
A few things can be pointed to, and all of which conflict to greater or lesser degrees with ECRI's position that the business cycle trumps all - even most opportunities for government intervention, or anything else they would consider to be "noise":
With the exception of Japan' supply chain ramping back up, all of the other bullet points listed are directly related to government actions taken to avert, or at least cushion, renewed recession, and it would appear that they have had a decidedly positive impact, in direct opposition to what ECRI implied back in September.
Can the US avoid recession now?
Of course. For those of us who like to assign percentage odds to things, the risk of a 2012 recession in the US may have fallen below 60% now. Not great, but certainly better than how our chances were looking just last fall.
New estimates just released from ADP suggest that the number of new jobs created last month may have been double what was expected. Plus, the four week moving average of initial jobless claims fell to to its lowest level in three and a half years during the month.
From Econoday.com
Released on 1/5/2012 8:15:00 AM For Dec, 2011PriorConsensusConsensus RangeActualADP employment206,000 160,000 145,000 to 220,000 325,000
Highlights
ADP is calling for a surge in private payroll growth, to 325,000 for December to double expectations for 160,000 and vs a revised 204,000 in November.
So, combined with retail sales that were pretty healthy most all month long, does the Economic Cycle Research Institute's bold and unwavering forecast from four months ago end up being their first incorrect recession call in its history?
The short answer is still, probably, no, but it is now clear that the odds of imminent new recession in the United States has been going down, and for reasons largely in conflict with ECRI's theology.
ECRI may have boxed itself in.
Unlike most forecasters who put out a percent chance of new recession (much like how we do here in the_recession during our polls), and more like weather forecasters, ECRI's calls are usually very black and white, no gray. They tend to either unequivocally say that a recession is imminent, or that recession is going to be averted. No percents needed, thank you very much.
According to Lakshman Achuthan, ECRI's managing director, they believe that the business cycle trumps all, and as such, this was their public statement released at the end of September:
ECRIToday the ECRI publicly announced that the U.S. is tipping into a recession.
Early last week, ECRI notified clients that the U.S. economy is indeed tipping into a new recession. And there’s nothing that policy makers can do to head it off.
ECRI’s recession call isn’t based on just one or two leading indexes, but on dozens of specialized leading indexes, including the U.S. Long Leading Index, which was the first to turn down - before the Arab Spring and Japanese earthquake - to be followed by downturns in the Weekly Leading Index and other shorter-leading indexes. In fact, the most reliable forward-looking indicators are now collectively behaving as they did on the cusp of full-blown recessions, not “soft landings.”
Not exactly any wiggle room in there. However, a few weeks ago when confronted with the reality of an economy seemingly improving while on Bloomberg, Lakshman did - adjust their description to clarify that what they really meant was that the US would be entering technical recession by the middle of 2012. Not exactly what I suspect most thought he meant at the end of September, 2011, but okay.
What happened between September & now to make the economy so much better?
A few things can be pointed to, and all of which conflict to greater or lesser degrees with ECRI's position that the business cycle trumps all - even most opportunities for government intervention, or anything else they would consider to be "noise":
- Tea Party demands run amok went to the back burner after we had our credit rating downgraded
- Japan supply chain interruptions ended and began reversing since fall, adding net positive to global GDP
- The Federal Reserve rolled out QE3 (" Operation Twist") in September
- The EU finally began coordinating and implementing stability measures by December, in time for Xmas sales
- The president got to sign payroll tax cuts and unemployment extensions
With the exception of Japan' supply chain ramping back up, all of the other bullet points listed are directly related to government actions taken to avert, or at least cushion, renewed recession, and it would appear that they have had a decidedly positive impact, in direct opposition to what ECRI implied back in September.
Can the US avoid recession now?
Of course. For those of us who like to assign percentage odds to things, the risk of a 2012 recession in the US may have fallen below 60% now. Not great, but certainly better than how our chances were looking just last fall.